Is Rental Income Subject to VAT in Saudi Arabia?
Residential rental is VAT-exempt, while commercial rental is subject to 15% VAT.
Details
Residential Rental — Exempt
All residential units (apartments, villas and other permanent homes) are VAT-exempt. Article 30 of the Implementing Regulations does not address utilities bundled into the rent, so check their treatment with ZATCA or a tax adviser. Hotels, serviced apartments, guest houses, chalets and other temporary accommodation are not exempt and carry 15%.
Commercial Rental — 15% VAT
Offices, retail shops, warehouses, and commercial parking are subject to 15% VAT. A VAT-registered landlord must add 15% on top of the rent value.
VAT Registration Threshold
If your taxable revenues exceed 375,000 SAR annually, VAT registration is mandatory. Voluntary registration is available from 187,500 SAR.
Practical Example
- Commercial rent: 10,000 SAR/month
- VAT (15%): 1,500 SAR
- Total tenant pays: 11,500 SAR
- Landlord remits 1,500 SAR to ZATCA